Diller in line to head shopping network TCI hopes Ex-Fox chief can increase profits

CLEARWATER, FLA. — CLEARWATER, Fla. -- Home Shopping Network Inc. is expected to name former Fox network chief Barry Diller chairman as early as next week, according to a person close to the company.

The appointment is part of a plan by Tele-Communications Inc. President John Malone to improve profits at the No. 2 home-shopping channel, which has lagged behind QVC Inc. in recent years. TCI, the nation's largest cable company, is a major investor in Home Shopping Network.


A more profitable HSN would provide Mr. Diller -- who ran QVC until last year -- with the cash he needs to turn his small television network, Silver King Communications Inc., into a major broadcaster, analysts said.

"He's got more cash to do it if he's got Home Shopping Network," said Dennis McAlpine, an analyst with Josephthal, Lyon & Ross.


As part of the transaction, Englewood, Colo.-based TCI will exchange its stake in HSN for a larger interest in Silver King. The exchange will make Home Shopping Network a subsidiary of Silver King, said the person close to the transaction.

In August, Mr. Diller bought 20 percent of ailing Silver King, a St. Petersburg, Fla.-based owner of 12 stations that broadcast on the low-power UHF frequency. Silver King also owns 26 small stations that rebroadcast Home Shopping programs in a radius of generally less than 10 miles.

At the time, Mr. Diller was named to the board of Home Shopping, which is controlled by TCI's Liberty Media unit.

Under the latest proposal, TCI would give Silver King its 41 percent equity stake and 80 percent voting interest in HSN.

In exchange, TCI will receive Silver King shares in a tax-free transaction, raising its ownership to close to half from 20 percent, the source said. Mr. Diller will receive options in HSN as part of his compensation package.

The announcement is expected to be made at the Western Cable Show in Anaheim, Calif., next week. The proposal was first reported yesterday by USA Today.

Home Shopping Network shares rose $1 to $9.50 in trading of 1.29 million shares, compared with a three-month daily average of 317,292. Silver King stock climbed $4.25 to $35. TCI stock rose 25 cents to $18.50.

HSN would receive a much needed boost under Mr. Diller. His fortunes, for now, are tied to the success of HSN because his Silver King Stations only broadcast Home Shopping programs.


More important, Mr. Diller is intent on finding other outlets on cable to distribute Home Shopping programs. He also needs to find new shows for Silver King that would attract a broader audience, the person close to HSN said.

That will be tough, because the stations reach a small audience.

At HSN, Mr. Diller "gets the potential of turning it around and making himself a hero, but it doesn't do much to help him build a network, unless he can increase its reach," Mr. McAlpine said.

Mr. Diller has a long history of success in television. Under News Corp. Chairman Rupert Murdoch, Mr. Diller turned Fox Broadcasting from a minor irritant to a major competitor against Capital Cities/ABC Inc.'s ABC, General Electric Co.'s NBC, and Westinghouse Electric Corp.'s CBS Inc.

After leaving Fox, Mr. Diller joined QVC where he unsuccessfully made a bid to merge QVC with CBS.

Praised as one of the nation's top television programmers who single-handedly set the standard for attracting younger viewers to television, his latest entry into television through Silver King is likely to be an uphill battle because of the limited reach of the company's 12 stations.